President Biden’s $2.25 trillion infrastructure package, which would raise the federal corporate tax rate to 28% from 21%, would hurt the U.S. economy and result in one million jobs lost within two years, according to a new study from the National Association of Manufacturers (NAM) conducted by Rice University economists.
The study estimates that Biden’s infrastructure plan will result in a GDP loss of $117 billion by 2023, $190 billion in 2026, and by $119 billion in 2031. The study estimates, “The reduction in hours worked would be equivalent to an employment decline of approximately 1 million full-time jobs in 2023.”
It adds that, “Real wages would fall by 0.6% in the long run, and total labor compensation, including wages and benefits, would decline by 0.6% initially before falling by 0.3% after 10 years. In the long run, total compensation would also decline by 0.6%.”
The corporate tax increase alone would undermine the post-pandemic recovery of the U.S. economy, while putting the United States at a competitive disadvantage by increasing the cost of production. According to the Tax Foundation, “An increase in the federal corporate tax rate to 28 percent would raise the U.S. federal-state combined tax rate to 32.34 percent, higher than every country in the OECD, the G7, and all our major trade partners and competitors including China.”
An increase in the federal corporate tax rate to 28 percent would raise the U.S. federal-state combined tax rate to 32.34 percent, higher than every country in the OECD, the G7, and all our major trade partners and competitors including China. pic.twitter.com/MA8D7R3jx1
— Tax Foundation (@TaxFoundation) April 5, 2021
The plan to undermine post-pandemic recovery comes as other OECD countries plan to do the opposite, reducing corporate tax rates and implementing other changes to boost domestic investment.
As the Tax Foundation points out, “When the U.S. last had the highest corporate tax rate in the OECD, prior to tax reform in 2017 with the Tax Cuts and Jobs Act (TCJA), the U.S. experienced several years of economic malaise, including chronically low levels of investment, productivity, and wage growth, as well as major distortions and avoidance schemes in the corporate sector.”
